Article 254 of the Saudi Civil Transactions Law
المادة 254 من نظام المعاملات المدنية · الفصل الثاني: حوالة الدين
The assignor guarantees the solvency of the person assigned to at the time the assignment is concluded if it is between him and the assignee, and at the time it takes effect if it is between him and the person assigned to, unless otherwise agreed.
Official text (Arabic)
This article has not been amended since the law was issued.
يضمن المحيل يسار المحال عليه وقت انعقاد الحوالة إذا كانت الحوالة بين المحيل والمحال، ووقت نفاذها إذا كانت الحوالة بين المحيل والمحال عليه؛ ما لم يتفق على خلاف ذلك.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 254 explained in plain English
In an assignment of a debt, the creditor (the assignee) moves from his original debtor to a new debtor (the person assigned to). To protect him from being referred to someone unable to pay, the Article provides that the assignor guarantees the solvency of the person assigned to, meaning his financial ability to pay.
The time at which solvency is considered differs according to the parties to the assignment:
- If the assignment is between the assignor and the assignee (the debtor and the creditor): the assignor guarantees the solvency of the person assigned to at the time the assignment is concluded.
- If the assignment is between the assignor and the person assigned to (the original debtor and the new debtor): the assignor guarantees the solvency of the person assigned to at the time it takes effect.
This rule is not mandatory, as the parties may agree otherwise, for example by agreeing that there is no guarantee or on another time.
The guarantee here is established by the text of the Article without need to stipulate it, unless the parties agree otherwise.
The Article is connected with Article 253, which specifies the defenses of the person assigned to against the assignee, as both regulate the relationships among the parties to an assignment of a debt once it exists.
A creditor who accepts an assignment of a debt should make sure of the new debtor's solvency at the time the text takes into account, and review whether the agreement has modified this guarantee. Where needed, it is advisable to consult a lawyer specializing in civil cases.
Practical example
A company in Dammam was owed a debt by Abdulrahman, and agreed with him that it would be assigned to another person who would bear the debt. When the assignment was concluded, the person assigned to was insolvent and unable to pay. Since the assignment was made between Abdulrahman (the assignor) and the company (the assignee), Abdulrahman guarantees the solvency of the person assigned to at the time of conclusion, unless they agreed otherwise.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Frequently asked questions about Article 254 of the Saudi Civil Transactions Law
Does the original debtor guarantee the new debtor's ability to pay?
Yes. The assignor guarantees the solvency of the person assigned to unless otherwise agreed.
When is the solvency of the person assigned to considered?
At the time of conclusion if the assignment is between the assignor and the assignee, and at the time it takes effect if it is between the assignor and the person assigned to.
May the assignor be exempted from guaranteeing solvency by agreement?
Yes. The Article states the guarantee unless otherwise agreed.
More articles on Assignment of Rights and Debts
- Article 238
The Article allows a creditor to assign his right to another person unless legal provisions, agreement or the nature of the obligation prevent it, and does not require the debtor's consent for the assignment to be concluded.
للدائن أن يحيل حقه إلى شخص آخر، وذلك ما لم تقتضِ النصوص النظامية أو الاتفاق أو طبيعة الالتزام خلاف ذلك، ولا يشترط لانعقاد الحوالة رضى المدين بها.
- Article 239
The Article limits the validity of an assignment of a right to the portion that is attachable, so what cannot be attached cannot validly be assigned.
لا تصح حوالة الحق إلا بقدر ما يكون منه قابلًا للحجز.
- Article 240
The Article requires, for an assignment to be enforceable against the debtor and third parties, that the debtor accept it or be notified of it by a lawful means, and that acceptance relied on against third parties be in writing with a certain date.
لا تكون حوالة الحق نافذة تجاه المدين أو تجاه الغير إلا إذا قبلها المدين أو أُعلِم بها بأي وسيلة مقررة نظامًا، على أن نفاذها تجاه الغير بقبول المدين يستلزم أن يك
- Article 241
The Article provides that the assigned right passes to the assignee with its attributes, accessories and guarantees as it was with the assignor.
ينتقل الحق إلى المحال له بصفاته وتوابعه وضماناته.
- Article 242
The Article determines the assignor's guarantee: in an assignment for consideration he guarantees the existence of the right at the time it is concluded unless otherwise agreed, and in an assignment without consideration he does not guarantee its existence.
1- إذا كانت الحوالة بعوض، لم يضمن المحيل إلا وجود الحق المحال به وقت انعقاد الحوالة، ما لم يتفق على خلاف ذلك. 2- إذا كانت الحوالة بغير عوض، لم يضمن المحيل وجود
- Article 243
The assignor does not guarantee the debtor's solvency except by special agreement, and if he guarantees it, the guarantee applies to solvency at the time the assignment is concluded unless otherwise agreed.
لا يضمن المحيل يسار المدين إلا إذا وجد اتفاق خاص على هذا الضمان، وإذا ضمن المحيل يسار المدين لا ينصرف هذا الضمان إلا إلى اليسار وقت انعقاد الحوالة ما لم يتفق عل
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.